Q & A about Settlements, Verdicts, and Attorney's Fees in Civil Cases
* Is my settlement money taxable?
Generally, settlements in personal injury cases are not taxable. Your attorney will be taxes on his share (contingency fee) of the settlement because it is his/her income, but your share is not considered income, within the IRS code. Any settlements in employment cases, including wrongful terminatoin and discrimination cases, are taxable as ordinary income.
* I heard that a prevailing party is entitled to attorneys fees. Who gets these fees?
Generally, reasonable attorney's fees are awarded in those few situations where an employment case under ADA, FEHA and a number of other statutes goes all the way to and through trial, and your attorney files a post-trial motion for attorney's fees. Since over 95% of the cases settle before trial, this is a rare issue. However, normally any awarded attorneys fees after trial are split the same way that the verdict is split. In other words, if your fee agreement providers for a 40% attorney's fees, your attorney should be receiving 40% of the attorney's fees awarded by the court and you, the plaintiff, should be receiving the other 60%. Some agreements provide for different terms, and it's important that you fee agreement specificies how any awarded attorneys fees are disbursed.
Generally, settlements in personal injury cases are not taxable. Your attorney will be taxes on his share (contingency fee) of the settlement because it is his/her income, but your share is not considered income, within the IRS code. Any settlements in employment cases, including wrongful terminatoin and discrimination cases, are taxable as ordinary income.
* I heard that a prevailing party is entitled to attorneys fees. Who gets these fees?
Generally, reasonable attorney's fees are awarded in those few situations where an employment case under ADA, FEHA and a number of other statutes goes all the way to and through trial, and your attorney files a post-trial motion for attorney's fees. Since over 95% of the cases settle before trial, this is a rare issue. However, normally any awarded attorneys fees after trial are split the same way that the verdict is split. In other words, if your fee agreement providers for a 40% attorney's fees, your attorney should be receiving 40% of the attorney's fees awarded by the court and you, the plaintiff, should be receiving the other 60%. Some agreements provide for different terms, and it's important that you fee agreement specificies how any awarded attorneys fees are disbursed.
